Millennials will soon be the most prominent demographic in the workforce, and many of these employees have been saddled with tremendous amounts of student loan debts. So it just makes sense that student loan repayment benefits are starting to gain some major traction with young workers.
As reported on HRBenefitsAlert.com, some forward-thinking firms are already offering direct student loan repayment options.
And employees have made it clear that this type of benefit is something they want from their employers.
In fact, nearly 80% of individuals with student loans would like to work for a company with repayment assistance with a matching opportunity, according to a study by iontuition.
What’s more, 49% of those individuals said they’d prefer student loan payment contributions to an employer-sponsored 401(k) plan.
Now one 401(k) administration provider has rolled out a new plan feature that aims to combine student loan repayment with retirement savings.
An incentive for loan payments
Prudential Retirement has teamed up with Student Loan Genius, a firm that facilitates loan repayment options, to offer a new 401(k) contribution feature for plan sponsors.
Here’s how the feature works: When employees makes a student loan payment they will receive a pretax contribution to their retirement plan from their employer regardless of whether they currently contribute to the plan.
Employers can make the contribution in a number of ways — fixed dollar amount, percentage of the employee’s student loan or a percentage of the employee’s total compensation — in a number of different ways — bi-weekly, monthly, annually, etc.
The impetus for this plan feature? High student loan balances — the class of 2015 graduated with $35,051 in student debt on average — tend to cause younger workers to forgo participation in their companies’ 401(k) plans or contribute at a percentage that’s well below what’s needed to set them up for a comfortable retirement.
As Prudential Retirement’s Senior VP and Head of Total Retirement Solutions puts it:
“As student loan debt grows, workers are having to choose between paying off their student loans or prioritizing other important financial goals … Our research tells us many workers will choose to pay down debt rather than save for retirement.”